> what if cities were set up as private structures and received minimal help
> from the state? They’d have to earn their own money (taxes) and spend it
> accordingly. Essentially, city startups. Similarly to capitalistic businesses,
> they would be incentivized to ensure projects cost less.
The way to reform expensive infrastructure, public or private, is to price the use of expensive infrastructure. The problem with the current system is not just the poor contracting incentives outlined by the author, but that there is no alignment of costs & revenue. An unpopular and useless road costs the same as a popular & useful one, but the revenue for both is the same - $0, and the ROI on both is negative. A city actually run like a startup would very quickly conclude that building free roads for unlimited use is bad business model and stop doing it altogether but I think the author is implying that the startup city would continue to provide unlimited free roads, but would somehow make up for it with better contracting discipline.
With no pricing signals for capital costs, operational costs, or externalities of road consumption, road consumers act like consumers everywhere - with prices dramatically lower than the private value they provide to the consumer, they consume more.
Like a Starbucks handing out free coffee at a loss, this creates huge lineups & congestion. Then we decide that to fix it, we should build another Starbucks handing out free coffee at a loss rather than just charging for coffee like any other business.
Some will counter that this unfair to the driving public, but this is incorrect. The entire public (not just drivers) own the infrastructure - if we want to maximize the public good, we have to consider the returns to the public as a whole (aka revenue on public infrastructure) rather just to the portion of the public who consume the infrastructure and benefit most when it's free.
Others will assume this is an argument for privatization or charging for basic necessities of life, but the is also incorrect. There's nothing wrong with public ownership of infrastructure, nor with public infrastructure deployed in a way that subsidizes human needs. But it's important to know who is subsidizing who, and to be able to differentiate between needs & wants. In a system where consumers are entitled to unlimited free use, those that consume the least are subsidizing those who consume the most. This can be a reasonable model for some public efforts, such as health care, but a terrible model for others.
> what if cities were set up as private structures and received minimal help > from the state? They’d have to earn their own money (taxes) and spend it > accordingly. Essentially, city startups. Similarly to capitalistic businesses, > they would be incentivized to ensure projects cost less.
The way to reform expensive infrastructure, public or private, is to price the use of expensive infrastructure. The problem with the current system is not just the poor contracting incentives outlined by the author, but that there is no alignment of costs & revenue. An unpopular and useless road costs the same as a popular & useful one, but the revenue for both is the same - $0, and the ROI on both is negative. A city actually run like a startup would very quickly conclude that building free roads for unlimited use is bad business model and stop doing it altogether but I think the author is implying that the startup city would continue to provide unlimited free roads, but would somehow make up for it with better contracting discipline.
With no pricing signals for capital costs, operational costs, or externalities of road consumption, road consumers act like consumers everywhere - with prices dramatically lower than the private value they provide to the consumer, they consume more.
Like a Starbucks handing out free coffee at a loss, this creates huge lineups & congestion. Then we decide that to fix it, we should build another Starbucks handing out free coffee at a loss rather than just charging for coffee like any other business.
Some will counter that this unfair to the driving public, but this is incorrect. The entire public (not just drivers) own the infrastructure - if we want to maximize the public good, we have to consider the returns to the public as a whole (aka revenue on public infrastructure) rather just to the portion of the public who consume the infrastructure and benefit most when it's free.
Others will assume this is an argument for privatization or charging for basic necessities of life, but the is also incorrect. There's nothing wrong with public ownership of infrastructure, nor with public infrastructure deployed in a way that subsidizes human needs. But it's important to know who is subsidizing who, and to be able to differentiate between needs & wants. In a system where consumers are entitled to unlimited free use, those that consume the least are subsidizing those who consume the most. This can be a reasonable model for some public efforts, such as health care, but a terrible model for others.